DOJ may sue over e-book pricing

The Justice Department may sue Apple and possibly two publishers over alleged price-fixing of e-books for the iPad as soon as Wednesday while reaching settlements with other publishing houses, a knowledgeable source confirmed to POLITICO.

The suit is the result of a lengthy investigation into allegations that Apple and five major publishers coordinated the pricing structure of e-books, as Apple sought to enter a market dominated by Amazon and its Kindle e-reader two years ago.

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The publishers that have been under investigation are Simon & Schuster, HarperCollins Publishers, Hachette Book Group, Pearson and Macmillan.

Several publishers have been engaged in settlement talks with DOJ, while Apple has not participated, a source told POLITICO. However, the DOJ was said to be readying cases against possibly two of the publishers.

Apple declined to comment. The Justice Department also declined to comment. The five publishers could not be reached.

A knowledgeable source told POLITICO that Justice was looking for a settlement that would ensure the publishers not only scrap their current agreements over pricing with Apple, but are truly acting independently — with conditions or clauses that other publishers could not guess.

Under the pricing model Apple used, called agency pricing, publishers set the price for e-books, and Apple receives 30 percent of that price for the books it sells.

Apple is already defending itself against a proposed class-action lawsuit in a New York federal court that alleges violations of federal and state antitrust laws by the company and publishers. The plaintiffs in the private case allege that Apple and the publishers worked in concert to set e-book prices, in part to counter Amazon’s dominance of the market.

In a March filing in that case, Apple’s attorneys said the agency pricing agreements are “well established as lawful and legitimate business conduct.” They argued that Apple negotiated the agreements separately with each publisher.

This article first appeared on POLITICO Pro at 8:01 a.m. on April 11, 2012.